by the Managing Director.
\n4.
\nThe Board of Directors shall adopt the detailed guidelines on the modalities for implementing the primary market support facility.
\n5.
\nThe Board of Directors shall decide by mutual agreement, on a proposal from the Managing Director and after having received a report from the European Commission in accordance with Article 13(7), the disbursement of financial assistance to a beneficiary Member State through operations on the primary market.
\nSUPPORT UNDER THE EUROPEAN STABILITY MECHANISM Secondary market support facility 1.
\nThe Board of Governors may decide to arrange for operations on the secondary market in relation to the bonds of an ESM Member in accordance with Article 12(1).
\n2.
\nDecisions on interventions on the secondary market to address contagion shall be taken on the basis of an analysis of the ECB recognising the existence of exceptional financial market circumstances and risks to financial stability.
\n3.
\nThe conditionality attached to the secondary market support facility shall be detailed in the MoU, in accordance with Article 13(3).
\n4.
\nThe financial terms and conditions under which the secondary market operations are to be conducted shall be specified in a financial assistance facility agreement, to be signed by the Managing Director.
\n5.
\nThe Board of Directors shall adopt the detailed guidelines on the modalities for implementing the secondary market support facility.
\n6.
\nThe Board of Directors shall decide by mutual agreement, on a proposal from the Managing Director, to initiate operations on the secondary market.
\nThe Board of Governors may review the list of financial assistance instruments provided for in Articles 14 to 18 and decide to make changes to it.
\n1.
\nWhen granting stability support, the ESM shall aim to fully cover its financing and operating costs and shall include an appropriate margin.
\n2.
\nFor all financial assistance instruments, pricing shall be detailed in a pricing guideline, which shall be adopted by the Board of Governors.
\n3.
\nThe pricing policy may be reviewed by the Board of Governors.
\n1.
\nThe ESM shall be empowered to borrow on the capital markets from banks, financial institutions or other persons or institutions for the performance of its purpose.
\n2.
\nThe modalities of the borrowing operations shall be determined by the Managing Director, in accordance with detailed guidelines to be adopted by the Board of Directors.
\n3.
\nThe ESM shall use appropriate risk management tools, which shall be reviewed regularly by the Board of Directors.
\nFINANCIAL MANAGEMENT
\n1.
\nThe Managing Director shall implement a prudent investment policy for the ESM, so as to ensure its highest creditworthiness, in accordance with guidelines to PARTICIPATION AND GRANTING OF FINANCIAL STABILITY SUPPORT UNDER THE EUROPEAN STABILITY MECHANISM be adopted and reviewed regularly by the Board of Directors. The ESM shall be entitled to use part of the return on its investment portfolio to cover its operating and administrative costs.
\n2.
\nThe operations of the ESM shall comply with the principles of sound financial and risk management.
\n1.
\nThe Board of Directors may decide, by simple majority, to distribute a dividend to the ESM Members where the amount of paid-in capital and the reserve fund exceed the level required for the ESM to maintain its lending capacity and where proceeds from the investment are not required to avoid a payment shortfall to creditors. Dividends are distributed pro rata to the contributions to the paid-in capital, taking into account the possible acceleration referred to in Article 41(3).
\n2.
\nAs long as the ESM has not provided financial assistance to one of its members, the proceeds from the investment of the ESM paid-in capital shall be returned to the ESM Members according to their respective contributions to the paidin capital, after deductions for operational costs, provided that the targeted effective lending capacity is fully available.
\n3.
\nThe Managing Director shall implement the dividend policy for the ESM in accordance with guidelines to be adopted by the Board of Directors.
\n1.
\nThe Board of Governors shall establish a reserve fund and, where appropriate, other funds.
\n2.
\nWithout prejudice to Article 23, the net income generated by the ESM operations and the proceeds of the financial sanctions received from the ESM Members under the multilateral surveillance procedure, the excessive deficit procedure and the macro-economic imbalances procedure established under the TFEU shall be put aside in a reserve fund.
\n3.
\nThe resources of the reserve fund shall be invested in accordance with guidelines to be adopted by the Board of Directors.
\n4.
\nThe Board of Directors shall adopt such rules as may be required for the establishment, administration and use of other funds.
\n1.
\nLosses arising in the ESM operations shall be charged: (a) firstly, against the reserve fund; (b) secondly, against the paid-in capital; and (c) lastly, against an appropriate amount of the authorised unpaid capital, which shall be called in accordance with Article 9(3).
\n2.
\nIf an ESM Member fails to meet the required payment under a capital call made pursuant to Article 9(2) or (3), a revised increased capital call shall be made to all ESM Members with a view to ensuring that the ESM receives the total amount of paid-in capital needed. The Board of Governors shall decide an appropriate course of action for ensuring that the ESM Member concerned settles its debt to the ESM within a reasonable period of time. The Board of Governors shall be entitled to PARTICIPATION AND GRANTING OF FINANCIAL STABILITY SUPPORT UNDER THE EUROPEAN STABILITY MECHANISM require the payment of default interest on the overdue amount.
\n3.
\nWhen an ESM Member settles its debt to the ESM, as referred to in paragraph 2, the excess capital shall be returned to the other ESM Members in accordance with rules to be adopted by the Board of Governors.
\nThe Board of Directors shall approve the ESM budget annually.
\n1.
\nThe Board of Governors shall approve the annual accounts of the ESM.
\n2.
\nThe ESM shall publish an annual report containing an audited statement of its accounts and shall circulate to ESM Members a quarterly summary statement of its financial position and a profit and loss statement showing the results of its operations.
\nAn internal audit function shall be established according to international standards.
\nThe accounts of the ESM shall be audited by independent external auditors approved by the Board of Governors and responsible for certifying the annual financial statements. The external auditors shall have full power to examine all books and accounts of the ESM and obtain full information about its transactions.
\n1.
\nThe Board of Auditors shall consist of five members appointed by the Board of Governors for their competence in auditing and financial matters and shall include two members from the supreme audit institutions of the ESM Members - with a rotation between the latter - and one from the European Court of Auditors.
\n2.
\nThe members of the Board of Auditors shall be independent. They shall neither seek nor take instructions from the ESM governing bodies, the ESM Members or any other public or private body.
\n3.
\nThe Board of Auditors shall draw up independent audits. It shall inspect the ESM accounts and verify that the operational accounts and balance sheet are in order. It shall have full access to any document of the ESM needed for the implementation of its tasks.
\n4.
\nThe Board of Auditors may inform the Board of Directors at any time of its findings. It shall, on an annual basis, draw up a report to be submitted to the Board of Governors.
\n5.
\nThe Board of Governors shall make the annual report accessible to the national parliaments and supreme audit institutions of the ESM Members and to the European Court of Auditors.
\n6.
\nAny matter relating to this Article shall be detailed in the by-laws of the PARTICIPATION AND GRANTING OF FINANCIAL STABILITY SUPPORT UNDER THE EUROPEAN STABILITY MECHANISM ESM.
\nGENERAL PROVISIONS
\n1.
\nThe ESM shall have its seat and principal office in Luxembourg.
\n2.
\nThe ESM may establish a liaison office in Brussels.
\n1.
\nTo enable the ESM to fulfil its purpose, the legal status and the privileges and immunities set out in this Article shall be accorded to the ESM in the territory of each ESM Member. The ESM shall endeavour to obtain recognition of its legal status and of its privileges and immunities in other territories in which it performs functions or holds assets.
\nThe ESM shall have full legal personality; it shall have full legal capacity (a) (b) (c) (d) acquire and dispose of movable and immovable property; contract; be a party to legal proceedings; and enter into a headquarter agreement and/or protocols as necessary for ensuring that its legal status and its privileges and immunities are recognised and enforced.
\n3.
\nThe ESM, its property, funding and assets, wherever located and by whomsoever held, shall enjoy immunity from every form of judicial process except to the extent that the ESM expressly waives its immunity for the purpose of any proceedings or by the terms of any contract, including the documentation of the funding instruments.
\n4.
\nThe property, funding and assets of the ESM shall, wherever located and by whomsoever held, be immune from search, requisition, confiscation, expropriation or any other form of seizure, taking or foreclosure by executive, judicial, administrative or legislative action.
\n5.
\nThe archives of the ESM and all documents belonging to the ESM or held by it, shall be inviolable.
\n6.
\nThe premises of the ESM shall be inviolable.
\n7.
\nThe official communications of the ESM shall be accorded by each ESM Member and by each state which has recognised the legal status and the privileges and immunities of the ESM, the same treatment as it accords to the official communications of an ESM Member.
\n8.
\nTo the extent necessary to carry out the activities provided for in this Treaty, all property, funding and assets of the ESM shall be free from restrictions, regulations, controls and moratoria of any nature.
\n9.
\nThe ESM shall be exempted from any requirement to be authorised or licensed as a credit institution, investment services provider or other authorised licensed or regulated entity under the laws of each ESM Member.
\nPARTICIPATION AND GRANTING OF FINANCIAL STABILITY SUPPORT UNDER THE EUROPEAN STABILITY MECHANISM
\nThe Board of Directors shall lay down the conditions of employment of the Managing Director and other staff of the ESM.
\nThe Members or former Members of the Board of Governors and of the Board of Directors and any other persons who work or have worked for or in connection with the ESM shall not disclose information that is subject to professional secrecy. They shall be required, even after their duties have ceased, not to disclose information of the kind covered by the obligation of professional secrecy.
\n1.
\nIn the interest of the ESM, the Chairperson of the Board of Governors, Governors, alternate Governors, Directors, alternate Directors, as well as the Managing Director and other staff members shall be immune from legal proceedings with respect to acts performed by them in their official capacity and shall enjoy inviolability in respect of their official papers and documents.
\n2.
\nThe Board of Governors may waive to such extent and upon such conditions as it determines any of the immunities conferred under this Article in respect of the Chairperson of the Board of Governors, a Governor, an alternate Governor, a Director, an alternate Director or the Managing Director.
\n3.
\nThe Managing Director may waive any such immunity in respect of any member of the staff of the ESM other than himself or herself.
\n4.
\nEach ESM Member shall promptly take the action necessary for the purposes of giving effect to this Article in the terms of its own law and shall inform the ESM accordingly.
\n1.
\nWithin the scope of its official activities, the ESM, its assets, income, property and its operations and transactions authorised by this Treaty shall be exempt from all direct taxes.
\n2.
\nThe ESM Members shall, wherever possible, take the appropriate measures to remit or refund the amount of indirect taxes or sales taxes included in the price of movable or immovable property where the ESM makes, for its official use, substantial purchases, the price of which includes taxes of this kind.
\n3.
\nNo exemption shall be granted in respect of taxes and dues which amount merely to charges for public utility services.
\n4.
\nGoods imported by the ESM and necessary for the exercise of its official activities shall be exempt from all import duties and taxes and from all import prohibitions and restrictions.
\n5.
\nStaff of the ESM shall be subject to an internal tax for the benefit of the ESM on salaries and emoluments paid by the ESM, subject to rules to be adopted by the Board of Governors. From the date on which this tax is applied, such salaries and emoluments shall be exempt from national income tax.
\nPARTICIPATION AND GRANTING OF FINANCIAL STABILITY SUPPORT UNDER THE EUROPEAN STABILITY MECHANISM 6.
\nNo taxation of any kind shall be levied on any obligation or security issued by the ESM including any interest or dividend thereon by whomsoever held: (a) which discriminates against such obligation or security solely because of its origin; or (b) if the sole jurisdictional basis for such taxation is the place or currency in which it is issued, made payable or paid, or the location of any office or place of business maintained by the ESM.
\n1.
\nAny question of interpretation or application of the provisions of this Treaty and the by-laws of the ESM arising between any ESM Member and the ESM, or between ESM Members, shall be submitted to the Board of Directors for its decision.
\n2.
\nThe Board of Governors shall decide on any dispute arising between an ESM Member and the ESM, or between ESM Members, in connection with the interpretation and application of this Treaty, including any dispute about the compatibility of the decisions adopted by the ESM with this Treaty. The votes of the member(s) of the Board of Governors of the ESM Member(s) concerned shall be suspended when the Board of Governors votes on such decision and the voting threshold needed for the adoption of that decision shall be recalculated accordingly.
\n3.
\nIf an ESM Member contests the decision referred to in paragraph 2, the dispute shall be submitted to the Court of Justice of the European Union. The judgement of the Court of Justice of the European Union shall be binding on the parties in the procedure, which shall take the necessary measures to comply with the judgment within a period to be decided by said Court.
\nThe ESM shall be entitled, for the furtherance of its purposes, to cooperate, within the terms of this Treaty, with the IMF, any State which provides financial assistance to an ESM Member on an ad hoc basis and any international organisation or entity having specialised responsibilities in related fields.
\nTRANSITIONAL ARRANGEMENTS
\nDuring the transitional phase spanning the period from the entry into force of this Treaty until the complete run-down of the EFSF, the consolidated ESM and EFSF lending shall not exceed EUR 500 000 million, without prejudice to the regular review of the adequacy of the maximum lending volume in accordance with
\nof the forward commitment capacity to ensure that the consolidated lending ceiling is not breached.
\n1.
\nBy way of derogation from Article 13, the Board of Governors may decide that the EFSF commitments to provide financial assistance to an ESM Member under its agreement with that member shall be assumed by the ESM as far as such PARTICIPATION AND GRANTING OF FINANCIAL STABILITY SUPPORT UNDER THE EUROPEAN STABILITY MECHANISM commitments relate to undisbursed and unfunded parts of loan facilities.
\n2.
\nThe ESM may, if authorised by its Board of Governors, acquire the rights and assume the obligations of the EFSF, in particular in respect of all or part of its outstanding rights and obligations under, and related to, its existing loan facilities.
\n3.
\nThe Board of Governors shall adopt the detailed modalities necessary to give effect to the transfer of the obligations from the EFSF to the ESM, as referred to in paragraph 1 and any transfer of rights and obligations as described in paragraph 2.
\n1.
\nWithout prejudice to paragraph 2, payment of paid-in shares of the amount initially subscribed by each ESM Member shall be made in five annual instalments of 20% each of the total amount. The first instalment shall be paid by each ESM Member within fifteen days of the date of entry into force of this Treaty. The remaining four instalments shall each be payable on the first, second, third and fourth anniversary of the payment date of the first instalment.
\n2.
\nDuring the five-year period of capital payment by instalments, ESM Members shall accelerate the payment of paid-in shares, in a timely manner prior to the issuance date, in order to maintain a minimum 15% ratio between paid-in capital and the outstanding amount of ESM issuances and guarantee a minimum combined lending capacity of the ESM and of the EFSF of EUR 500 000 million.
\n3.
\nAn ESM Member may decide to accelerate the payment of its share of paidin capital.
\n1.
\nAt inception, the ESM Members shall subscribe the authorised capital stock on the basis of the initial contribution key as specified in Annex I. The temporary correction included in this initial contribution key shall apply for a period of twelve years after the date of adoption of the euro by the ESM Member concerned.
\n2.
\nIf a new ESM Member's gross domestic product (GDP) per capita at market prices in euro in the year immediately preceding its accession to the ESM is less than 75 % of the European Union average GDP per capita at market prices, then its contribution key for subscribing to ESM authorised capital stock, determined in accordance with Article 10, shall benefit from a temporary correction and equal the sum of: (a) 25% of the percentage share in the ECB capital of the national central bank of that ESM Member, determined in accordance with Article 29 of the ESCB Statute; and (b) 75% of that ESM Member's percentage share in the gross national income (GNI) at market prices in euro of the euro area in the year immediately preceding its accession to the ESM.
\nThe percentages referred to in points (a) and (b) shall be rounded up or down to the nearest multiple of 0,0001 percentage points. The statistical terms shall be those published by Eurostat.
\n3.
\nThe temporary correction referred to in paragraph 2 shall apply for a period of twelve years from the date of adoption of the euro by the ESM Member concerned.
\n4.
\nAs a result of the temporary correction of the key, the relevant proportion of PARTICIPATION AND GRANTING OF FINANCIAL STABILITY SUPPORT UNDER THE EUROPEAN STABILITY MECHANISM shares allocated to an ESM Member pursuant to paragraph 2 shall be reallocated amongst the ESM Members not benefiting from a temporary correction on the basis of their shareholding in the ECB, determined in accordance with Article 29 of the ESCB Statute, subsisting immediately prior to the issue of shares to the acceding ESM Member.
\n1.
\nEach ESM Member shall designate its Governor and alternate Governor within the two weeks of the entry into force of this Treaty.
\n2.
\nThe Board of Governors shall appoint the Managing Director and each Governor shall appoint a Director and an alternate Director within the two months of the entry into force of this Treaty.
\nFINAL PROVISIONS
\nT h i s Tr e a t y s h a l l b e o p e n f o r a c c e s s i o n b y o t h e r M e m b e r S t a t e s o f t h e European Union in accordance with Article 2 upon application for membership that any such Member State of the European Union shall file with the ESM after the adoption by the Council of the European Union of the decision to abrogate its derogation from adopting the euro in accordance with Article 140(2) TFEU. The Board of Governors shall approve the application for accession of the new ESM Member and the detailed technical terms related thereto, as well as the adaptations to be made to this Treaty as a direct consequence of the accession.
\nFollowing the approval of the application for membership by the Board of Governors, new ESM Members shall accede upon the deposit of the instruments of accession with the Depositary, who shall notify other ESM Members thereof.
\nThe following Annexes to this Treaty shall constitute an integral part thereof:
\n1)
\nThis Treaty shall be deposited with the General Secretariat of the Council of the European Union (\"the Depositary\"), which shall communicate certified copies to all the signatories.
\n1.
\nThis Treaty shall be subject to ratification, approval or acceptance by the signatories. Instruments of ratification, approval or acceptance shall be deposited with the Depositary.
\n2.
\nThe Depositary shall notify the other signatories of each deposit and the date thereof.
\nPARTICIPATION AND GRANTING OF FINANCIAL STABILITY SUPPORT UNDER THE EUROPEAN STABILITY MECHANISM
\n1.
\nThis Treaty shall enter into force on the date when instruments of ratification, approval or acceptance have been deposited by signatories whose initial subscriptions represent no less than 90% of the total subscriptions set forth in Annex II. Where appropriate, the list of ESM Members shall be adjusted; the key in Annex I shall then be recalculated and the total authorised capital stock in Article 8(1) and Annex II and the initial total aggregated nominal value of paid-in shares in Article 8(2) shall be reduced accordingly.
\n2.
\nFor each signatory which thereafter deposits its instrument of ratification, approval or acceptance, this Treaty shall enter into force on the day following the date of deposit.
\n3.
\nFor each State which accedes to this Treaty in accordance with Article 44, this Treaty shall enter into force on the twentieth day following the deposit of its instrument of accession.
\nDone at Brussels on the second day of February in the year two thousand and twelve in a single original, whose Dutch, English, Estonian, Finnish, French, German, Greek, Irish, Italian, Maltese, Portuguese, Slovak, Slovenian, Spanish and Swedish texts are equally authentic, which shall be deposited in the archives of the Depositary which shall transmit a duly certified copy to each of the Contracting Parties.
\nPARTICIPATION AND GRANTING OF FINANCIAL STABILITY SUPPORT UNDER THE EUROPEAN STABILITY MECHANISM ANNEX I Contribution Key of the ESM ESM Member Kingdom of Belgium Federal Republic of Germany Republic of Estonia Ireland Hellenic Republic Kingdom of Spain French Republic Italian Republic Republic of Cyprus Grand Duchy of Luxembourg Malta Kingdom of the Netherlands Republic of Austria Portuguese Republic Republic of Slovenia Slovak Republic Republic of Finland Total ESM key (%) 3,4771 27,1464 0,1860 1,5922 2,8167 11,9037 20,3859 17,9137 0,1962 0,2504 0,0731 5,7170 2,7834 2,5092 0,4276 0,8240 1,7974 100,0 PARTICIPATION AND GRANTING OF FINANCIAL STABILITY SUPPORT UNDER THE EUROPEAN STABILITY MECHANISM ANNEX II Subscriptions to the authorised capital stock ESM Member Kingdom of Belgium Federal Republic of Germany Republic of Estonia Ireland Hellenic Republic Kingdom of Spain French Republic Italian Republic Republic of Cyprus Grand Duchy of Luxembourg Malta Kingdom of the Netherlands Republic of Austria Portuguese Republic Republic of Slovenia Slovak Republic Republic of Finland Total Number of shares 243 397 1 900 248 13 020 111 454 197 169 833 259 1 427 013 1 253 959 13 734 17 528 5 117 400 190 194 838 175 644 29 932 57 680 125 818 7 000 000 Capital subscription (EUR) 24 339 700 000 190 024 800 000 1 302 000 000 11 145 400 000 19 716 900 000 83 325 900 000 142 701 300 000 125 395 900 000 1 373 400 000 1 752 800 000 511 700 000 40 019 000 000 19 483 800 000 17 564 400 000 2 993 200 000 5 768 000 000 12 581 800 000 700 000 000 000 PARTICIPATION AND GRANTING OF FINANCIAL STABILITY SUPPORT UNDER THE EUROPEAN STABILITY MECHANISM SCHEDULE 4 (Article 4)